A time capsule of the greatest financial mania in the history of mankind, told in real-time by regular folks and patriots. May future generations better understand the madness of crowds, and how power and money corrupt.

October 30, 2007

I doubt Bernanke reads HP, but ya never know. Hell, I doubt if Bernanke reads much of anything up in his ivory tower. But we have lots of MSM, columnists and reporters reading, and they'd likely be interested in what you have to say about The Fed and what they should do next, and what you think of 'em.Open up with both barrels HP'ers. My out-there long-shot prediction - they hold tight. Oil at $100, gold at $800, a crashing US dollar, a since-corrected jobs report, and stocks at all-time highs (in dollar terms) should scare the f*ck out of 'em. Hyperinflation ain't pretty.

49 comments:

Mark in San Diego
said...

Cut 1/4 and then say they are "pausing to see how their cuts are working through the system.". . .the market won't like it much, but it won't crash. . . .the usual 200 point "hissy fit". . .I think they know that low rates are "pushing on a string" for the mortgage industry - 100% subprime loans are gone, and so is speculation. Houses will need to fall 20% to be affordable again in most areas.

Barnanke is a FOOL, a tool of Wall Street, if you would. Last September, he did the unexpected by cutting the rate by 50 basis points. He WILL do it again, because that's what the NAR wants, and what homedebtors EXPECT. A day's wages for a loaf of bread...

You are doing just fine and I applaud your acumen. You have a genuine and sophisticated understanding of the big picture, the US economy and how it fits into the world economy.

Keep up the good work. Looking forward to continued prosperity.

Regards,Area 51

P.S. Great ass-fu**ing you are giving to the commie Chinese...(though they haven't and won't see that big huge rod coming until it's too late) I love it.Great stealth-nuke you are sending their way.......

houses need to fall to the point where the dollar invested in cds pay equal return over the past 10 plus years ...about 80 percent by my calculation in reference to the lenders desires to lend and then not being able to afford what they lent to buy

The way I see it, the dollar is simply a paper security backed by the United States Government. It is no different than any other paper security such as stocks, bonds, notes, and bills. Right now, US dollars are unpopular and weak against real estate, gold, foreign currencies, and commodities. I have done well in the past buying unwanted or distressed assets. I believe it is time to trade overpriced assets for weak dollars. Additionally, restrictions could be waged against converting foreign currencies into dollars by the US and foreign governments in consideration of negative economic impact. As time progresses and interest rate increases become necessity, people will flee assets and seek dollars for asset reallocation and interest income. In my experience of the 10 year cycle since the 70’s this scenario has been the case.

I don’t pretend to know your job. I can’t even begin to imagine the responsibility you are shouldering.

Your decisions affect the money supply of this Nation and that of the World. You have been given control and authority; therefore this makes you a leader.

Now with that being said, let’s take a look at the characteristics of a leader. A leader is a servant to the people. A leader is supposed to serve as an example for others to follow. A leader has a clear sense of purpose, mission, focus and commitment.

“In leadership, as in the martial arts, your stance is critical to your success. If you have a weak stance, then every way you lead will be fundamentally flawed.” A quote taken from the following:

http://en.wikipedia.org/wiki/Leadership#The_Embodiment_of_Leadership

My favorite quote and one that I live by is this, "Leader's are much like eagles, they don't flock, you find them one at a time".

Thank you for flooding the market with money. Thank you for your diligent work in propping up our market. Thank you for monetizing all of those $hitty loans ... and most of all thanks for the agressive cut tomorrow!

50 BP cut - Ben has to inflate. Assuming that housing is a hedge against inflation, the obvious way to increase house prices and head off the problems with asset backed paper and CDOs is to inflate. Unfortunately for Uncle Ben, this also roaches the dollar and increases the price of oil and imports, which will send us into a consumer led recession. But it may save his homeys on Wall Street by giving them enough time to rearrange the deck chairs and leave others holding the bag when the turdburger hits the fan.

The Taylor Rule and various short-term yield spreads imply a Fed funds rate at no higher than 3.75% today and 3.25% by Q1-Q2 '08 at the emerging trend of the so-called real GDP growth gap.

The 3-mth. LIBOR has dipped below 5% as it did in the recession and housing bust of the early '90s and at the onset of the '01 recession. The LIBOR tends to track the Fed funds rate (reaching 1% with the Fed funds rate in '02-'03), so the LIBOR is set to plunge in the wks./mths. ahead, taking adj. mortgage rates back into the 4% range (not that many people can now qualify for them with house equity values contracting).

Also note that house prices in the early '90s fell with falling rates AND a firming US$ AND falling commodities prices.

Gold, oil, and other commodities are peaking here with the 9- to 10-yr. commodities cycle peak, with a 2- to 3-yr. downturn ahead.

With Japan likely already in recession, the EU seeing a significant deceleration in growth, the UK housing bubble FINALLY deflating, and the US tipping toward or already in recession, China-Asia is set for a HARD landing, reducing demand for commodities and pushing commodities prices lower with a firming of the US$.

Oh, and BTW, at the current rate of growth of Chinese real GDP (a suicidally inflationary and crash-bound 10-11%) and the rate of liquid fossil fuel reserves/production/consumption, China will consume the vast share of liquid fossil fuel production/supplies on/in the planet by mid-century.

In the context of western geopolitical/geoeconomic interests going forward, there is absolutely no way that the US, UK, EU, and Russia can permit China to grow at 10% real indefinitely; thus, expect that the Anglo-American power elite will have no choice but to take actions to bring China's growth to a recessionary/deflationary screeching halt while attempting to contain militarily the "middle kingdom" indefinitely.

As a consequence of western action to restrain Chinese growth and the Communist leaders' desperate attempts to obtain more energy reserves outside of the Asian region, expect US firms to begin reducing investment in Asia and repatriating Chinese bank deposits via primary dealers in Asia, the EU, UK, and elsewhere, reducing demand for Asian currencies by way of PBOC book-entry transfers of US securities from Chinese hands to US firms' hands and via increasing demand for the US$, allowing the US$ to firm just as everyone expects the US$ to collapse.

The firming and/or rising US$ will put a ceiling on commodities prices, including oil and gold, with the potential for gold to fall below $500 at some point and oil falling below $50.

Prepare now, as when the coming US-led, Boomer-induced debt-deflationary wave begins, it will be like a tsunami traveling at 100 mph. Don't get caught with your back to the ocean and too far from the beach.

Cash will be king, and US$ liquidity will become scarce. Get your US$'s while they're still cheap!!!

"Ben, trick or treat?" is a nice line, except it will be us who are tricked by Ben I assume.

Ben will reduce, probably by half a point. While the stock market and the job market are holding up still, the financial markets are suffereing from the mortgage fall-out, and the consumers are showing signs of pulling back. One might have a positive or a cynical view of why the rate will be reduced - positive: it is important to stay in front of the curve - cynical, as given in a previous thread: Rate reductions need some time to work through the system and they will give relieve in 2008 for Bush but increase the problems for the democratic successor, which is the way the conservative Fed prefers it.

The markets are like that drunk guy at the party you give one more shot just to see what will happen.

FED knows it's pushing on the string and in a way I think it may be the best thing. Sure inflation roars but the wheels keep turning and the structural financial markets continue to function up to and through the recession.

In the National Archives and Records Administration's 1999 Annual Report, National Archivist John W. Carlin writes,

"We are different because our government and our way of life are not based on the divine right of kings, the hereditary privileges of elites, or the enforcement of deference to dictators.

They are based on pieces of paper, the Charters of Freedom - the Declaration that asserted our independence, the Constitution that created our government, and the Bill of Rights that established our liberties."

"The highest courage is to dare to be yourself in the face of adversity. Choosing right over wrong, ethics over convenience, and truth over popularity... these are the choices that measure YOUR life. Travel the path of integrity without looking back, for there is never a wrong time to do the right thing." Author is unknown to me.

As I'm sure you are aware, the real problem is not M3, nor is it the various rates of interest.

The real problem is the global population boom combined with the spread of the American way of life to Asia.

The exponential rate at which our global population is consuming the Earth's limited natural resources, [including but not limited to oil], is now peaking out manufacturing, transportation, and farming inputs. A global economic crash of epic proportions awaits us just around the corner together with a potential collapse of civilization. In a worst case scenario, escalating resource-wars could result in all out global thermonuclear warfare and a Human Extinction Level Event.

IT'S TIME TO THINK OUTSIDE THE BOX.

We humans have created a throw-away society, with nearly everything being engineered with 'planned obsolescence' in mind. This has been done to fuel the so called economic "growth" that makes the Wall-Street's of the world so happy; but this system is doomed to fail in the end. It seems that the status-quo system and our resulting 'way-of-life' have entered their sun-set years; caused by the global natural resource supply streams 'peaking out'.

The entire global economic and financial USD based systems are on the verge of a meltdown as well documented by www.europe2020.org a European think tank funded by the Club of Rome.

As crazy as this may sound- We've been thinking that the best global-wide solution may be to radically reorganize our global society now under a one world government. This could be done by permitting the entire USD based system to crash in a relative short period of time by letting the USD go to ZERO. During this process the member federal reserve banks could purchase the entire 'float' of every major or key corporation. All the corporations could then be stripped of all fat, with a complete replacement of management. Homeland Security can be used to keep public dissent under control. If a master plan is developed and executed properly, the human race might escape the bulk of the horror unleashed when civilizations collapse.

You and/or your staff are hereby invited to request a meeting to further discuss these topics. You may submit such a request upon your official letterhead, mailed to: The J. Vincent Foundation, POB 137, New Albany, Ohio, Postal Code 43054.

Other entities who are invited to request a meeting include: The Council on Foreign Relations, The U.S. State Department, and the U.S. Department of Homeland Security.

When will the meeting discussing the design of $50000 notes convene? They are going to be useful (though for a few months at most), and I think FRS now has a perfect candidate for the portrait! Portraying living figures on dollar bills might be unfair but this time it's the US dollar that is dead!

Since my prediction is horrible I throw my hate in for 50 basis points. Here is why.

1) The dollar sucking wind when he cut he either knew it would happen and thus would do it again. OR he was so dimwitted that he will do it again. Either side of the argument does not look good and he does not want to seem like he made a mistake.

2) What does he care about? I am guessing he does not care about the dollar because if he had he would have done something a long time ago. Thus another drop is irrelevant. He cares about people getting into homes. I remember one speech where he said a neighborhood of owners is better than a neighborhood of renters since owners take care of their neighborhood.

3) He does not care about inflation since when he was supposed to be raising rates he did not. At least according to his Taylor formula.

I am thinking he will cut another 50 basis points and say he might increase in the future.

Think of it as follows. People cook the books. Like the NAR, and the housing sales "increase." If Bernanke were to cut to say 0% then raising by 3% is not so bad, right? But if you were at 3% and had to raise 3% that would be bad. Thus it is easier to cut hard and heavy and then raise to make it seem like you are caring about the dollar.

Fed Rate Cut Sought by Wall Street Would Have Only Limited Impact on Housing, Banking Sectors

WASHINGTON (AP) -- The interest rate cut that Wall Street believes will buffer the economy from housing market woes is unlikely to give much of a boost to suffering banks and homebuilders in the near term, analysts say.

The Federal Reserve policymaking committee is expected to approve cutting a key short-term rate at least a quarter percentage point Wednesday to help the economy get through a deeper-than-expected housing slump and credit crunch that accelerated in August.

If you really read the large wiki entry on Bretton Woods and pay special attention to the situation in 1970s and the Bretton Woods II proposal, you can see how we got to where we are. It also covers why we run deficits as of late instead of surpluses - although its up to you when we need to flip that around again.

For me, this article opened the black box that is Fed decision making and made some sense of it. Bernanake appears to be making rational choices, although very difficult ones. This really hit home with me:

In effect, other nations "purchased" American defense policy by taking a loss in holding dollars. They were only willing to do this as long as they supported U.S. military policy, because of the Vietnam war and other unpopular actions, the pro-U.S. consensus began to evaporate.

Dear Ben,I have listened to the advice of the most knowledgeable group of currencies experts here at HPand have loaded up my 2 car garage with gold bullion, pleeeeze cut the rates by 'a lot'don't let us down.

If the Fed lowers rates after 3.9% GDP growth, skyrocketing oil and commodities prices, and 4.7% unemployment they are truly irresponsible and will collapse the dollar. I will move all my money into foreign assets and many others will, too. If Ben thinks we have a housing problem now, wait until long-term rates hit 10% because of his printing presses. Your choice, Ben.

Only two choices, Cut or Stand, hiking is as likely as the orange one becoming the next Pope. Orange and white are good colors only on the Tennessee Volunteers.

They will cut. It will be easier to backpaddle after the cut. The Chinese, Japan, et al are going to play nice until holiday shopping has ceased and they get paid for the Christmas goodies. Wall Street peddled financial cancer.

The Chinese, in particular, are the ones to watch here. What do they do, in their best interest, as the much anticipated "coming out party" of the Olympics next year? I believe with only 28% exports, they could decouple without much fanfare. So they're GDP goes from 10% to 5% in a worst case. Big deal. They actually need the cooling.

I would love to be a fly on the wall in their strategy sessions. They could honestly make a good case of "do nothing". Let the Americans take themselves out.

It's really that bad people... gag rules on everyone about the dollar. And yet Paulson hocks a "strong dollar" policy. That leaves Bush to tell the truth. You can either wait for that to happen or read the handwriting on the wall.

Wow, thanks Ben. I love that I can feel the dollars in my pocket shriveling up. And working for a large co, I can't wait until I get my 4% raise. That sure will help when actual inflation surges in the 10% range. Funny how you don't figure in food or energy costs - because apparently people don't need to eat or fill up their cars with gas.

Continue to print more money and increase the money supply. Don't worry, everything will be fine. Afterall, what will foreigners the rest of the world do? Will they stop buying American securities and our Treasury's? Of course not. They have no alternative. The economy will continue to expand and on the bright side; with the dollar declining, we now only owe 70 to 80 cents on the dollar on that 9 trillion dollars in debt.

As a Canadian I'd like to see a rate cut that plunges the US dollar to a record low (we're only 1 cent away, so it's not asking for much).

I wouldn't mind picking up a used car on the cheap (I'll be the 4th one I know in the past 6 months).

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Oh, BTW, I hope you don't work for any car manufacturer, or in the tourism industry.

I think the Canadian energy industry will be the only segment to do well during our mega-recession.

I was planning a Yellowstone, Glacier National family vacation for next year. We were planning on going up to Banf too but it is getting way too expensive with the exchange rate like it is, so we will just keep it in the US this time. But do come visit the US.